Banks bump monthly amount due on credit cards

Gary Cone thinks there's got to be a better way than "The American Way."

"People have a tendency to live beyond their means and, for most people, credit is 'The American Way,'" said the construction superintendent from Melbourne, Fla. "Most people try to get by as cheaply as possible on a monthly basis. I always make a larger payment than what's requested by the credit companies each month."

That's a good thing, because the credit card arms of two major banks -- Bank of America and Wachovia -- have increased the monthly minimum payments customers must pay.

Cone, a client of Consumer Credit Counseling Services Inc., needs to reorganize his finances because of the damage hurricanes inflicted on his home and his ability to work.

"My company builds golf courses," he said. "It's been slow going for me."

But for the millions of Americans carrying credit card debt, the banks' move could be costly.

"The new policy of some banks to raise the minimum required payment on credit card accounts from 2 percent to 4 percent will impact many consumers," said Pamela Hart, manager of Consumer Credit Counseling Services Inc.

"For those who either pay their credit cards in full each month, or pay more than the minimum, there may be little impact," she said. "On the other hand, for those who are barely getting by and paying merely the minimum each month, the effect could be catastrophic."

Hart said that while the average American carries credit card debt of about $9,000, the average credit counseling client she sees has debt more in the neighborhood of $20,000 to $30,000.

She said the change from 2 percent of the balance to 4 percent of the balance would translate into the monthly amount due for a client with $9,000 in debt going from $180 a month to $360.

But for those who might be more overextended with $20,000 in credit card debt, that monthly payment will change from $400 a month to $800 a month.

When a consumer is in a debt-management program with a reputable credit counseling agency, most creditors will allow the consumer to make payments of 2 percent of the balance and will lower their interest rate to allow more of the principal to go toward the balance.

However, there is a price to pay, Hart said. The consumer must agree to destroy all of his or her credit cards and make a real effort to become debt-free.

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Banks bump monthly amount due on credit cards

Gary Cone thinks there's got to be a better way than 'The American Way.' 'People have a tendency to live beyond their means and, for most people, credit is 'The American Way,'' said the construction